Royal & Sun to sell assets to raise cash

Royal & SunAlliance is pressing ahead with a plan for a rights issue but has also earmarked some large chunks of its business that it wants to sell in order to raise capital.

Royal & SunAlliance is pressing ahead with a plan for a rights issue but has also earmarked some large chunks of its business that it wants to sell in order to raise capital.

The cash-strapped giant insurer is very unlikely to break itself up altogether. Having canvassed institutional shareholders, it believes it still has a viable future as one of Britain's largest insurance companies.

RSA said in the summer it was "considering a range of options" about how it would raise capital.

The insurer has already sold businesses worth nearly £800m. RSA has indicated it wants to raise the same amount again next year.

The City has speculated that one of the most likely disposals is its 71 per cent stake in Codan, a Danish-listed insurer.

RSA's stake is worth about £500m as measured as a percentage of its assets. RSA would probably receive less than this from a sale because the business is trading at a discount to its asset value.

RSA has been battered this year by falling stock markets and having to increase reserves for asbestosis. Its chief executive, Bob Mendelsohn, was forced to step down last month and has been temporarily replaced by Bob Gunn, RSA's chief operating officer.

But the company has witnessed more encouraging signs recently. Its share price has risen slightly, making a rights issue easier to get away. It also noted that Aviva, the UK's largest insurer, last week sold its Australasian businesses for twice their book value.

Robin Savage, at WestLB Panmure, said: "Selling Codan would be a fantastic solution to RSA's short-term financing issues and it may not need to have as large a rights issue as many people think."